An empirical analysis of the impact of structural changes in the mobile market

Abstract

In the present paper, we analyse the effect of a changing in market configuration in the mobile phone market in Italy on the consumers switching choices (churn rate). To this end, we examine a market context characterized by a restricted oligopoly subsequently shaken by a structural break. During the period considered for the analysis (2015–2018) the Italian mobile phone market has experienced significant changes: while, on the one hand, transactions brought to a merger between two of the main operators, on the other hand, the merger was approved under the condition of the entrance of a new operator in the market, in the attempt of preserving the beneficial effects of competition. Such evolution represents the ideal condition to test the impact of structural market changes in the competition game, in terms of features of the players, but not in terms of their number. To examine such scenario, we use data related to two different surveys (before and after M&A and new entry events) in order to empirically assess the effect of such changes on consumers’ (switching) choices. The empirical models consider the impact of individual socio-demographic and economic characteristics as well as a set of variables related to “choice theory” as proxies of transaction costs, information asymmetries, and implied value of service. As a result, it emerges how the change of the typology (but not the number) of the market players alters the nature of the game, so inducing a substantial increase in terms of both consumers and social welfare (with redistributive effects in favour of the most vulnerable subjects).